Permian Partners $($PP$)$ produces from aging oil fields in west Texas. Production is currently $1\mathrm{.}90$ million barrels per year, but is declining at $7\%$ per year for the foreseeable future. Costs of production, transportation, and administration add up to $$26\mathrm{.}00$ per barrel. The current oil price is $$66\mathrm{.}00$ per barrel.

PP has $8\mathrm{.}0$ million shares outstanding. The cost of equity is $9\%.$ All of PP$$s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $$26\mathrm{.}00.$ Also, ignore taxes.

a$.$Assume that oil prices are expected to fall to $$61\mathrm{.}00$ per barrel next year, and to $$56\mathrm{.}00$ and $$51\mathrm{.}00$ per barrel in the two years following. After that decrease, assume a long$-$term trend of oil$-$price increases at $5\%$ per year. What is the value of one PP share?

b$-1.$What is PP$$s E$/$P ratio?

b$-2.$Is it equal to the $9\%$ cost of capital?